In order to take out a car loan, you must be 18 and a legal resident of the US. If you just turned 18 and find that your credit is poor or nonexistent, you may be wondering what to do next.
Make Sure You Have the Income
On top of being a legal adult and citizen of the US, lenders want to make sure you have enough earned income to afford loan payments. Although this can vary by lender, subprime lenders typically require you to make a minimum of $1,500 to $2,000 a month before taxes. Typically, you must have worked at your current job for at least six months and have a three-year job history, too. As a result, if you’re a high school or college student balancing school and work, it can be difficult to meet the income requirement when you’re only working part-time and being paid minimum wage.
Once you’ve determined you make enough income to qualify for a car loan at 18, it’s time to consider building your credit. Even though a subprime auto loan can help raise your credit score, you can take extra measures to further boost it. Some things you can do in addition to taking out an auto loan are:
- Become an authorized user – A common way to get your credit score rolling is to getting added as an authorized user on someone else’s credit card account. When you become an authorized user, the account holder has the option of getting you a credit card in your name so that you can use it and make payments on any charges you make. Whether or not you’re allowed to use the card, the positive payment history benefits you both, thus increasing your score.
- Get a secured credit card – If you’re unable to become an authorized user and don’t qualify for a traditional credit card, you can apply for a secured credit card. Your credit limit is based on how much money you deposit in an account, and you can use it just like a normal credit card. After demonstrating your ability to make payments on time for a year or so, you may be able to convert it to a traditional credit card.
- Take out a small loan – Small loans include student loans, personal loans, or credit-builder loans. Some may require a cosigner, so make sure you study the details before applying for one.
Getting Your First Car Loan
If you’ve just turned 18 and are ready to finance your first car, let Drivers Lane point you in the right direction. We work with a coast-to-coast network of special finance car dealerships that have lenders available to help people who are struggling with credit challenges. Get started today by filling out our simple online auto loan request form now.